Thursday, 31 January 2013

Oil-rich emirate Qatar has put its vast £3bn Chelsea Barracks property project under review on fears over Britain’s flatlining economy, it was suggested on Monday night.

The proposed development, the Qataris biggest single investment in London, was due to include 450 luxury houses and 123 affordable homes. But the emirate’s property arm, Qatari Diar, is now said to be having second thoughts over the ambitious project, with the latest quarterly figures putting Britain on track for a triple-dip recession...

There are now also thought to be concerns that Qatar overpaid for the Barracks site when it bought it from the Ministry of Defence for £959m in 2007, and could compound that by spending another £2bn on its development. Plans for the weed-strewn site include seven-bedroom mansions as well as one-bedroom flats.

The numbers are insane; £959 million ÷ 573 flats = £1.7 million per flat, just for the land. And £959 million ÷ 12.8 acres = £15,500 per square yard. That's like covering the whole area with £1 coins stacked ten high.

Be that as it may, nothing is happening, it was a nice money raiser for HM Government, but the Qataris are losing money on the deal and no housing is being built, our builders aren't earning any money etc. Not a good outcome.

The extreme response would be to do like Hong Kong and tell the Qataris that the freehold has been converted to a thirty-year lease, so they'd better get on with it.

The fairer, and indeed fairest, thing to do would be to retrospectively apply LVT to that site, with an LVT bill of £29 million a year (£959 million x 3%).

So the Qataris get a refund* of £814 million (the £959 million they paid up front minus five years' worth of LVT for the period they've owned it), and the site will be costing them £29 million's worth of LVT for every year that they continue to own it, i.e. to demand government-protected exclusive possession.

The Qataris will be able to use the £814 million refund* to pay half the construction costs, and then when they sell they'll each be liable to £50,000 a year in LVT (573 x £50,000 = £29 million).

* Obviously, the UK government would be advised to stick that £814 million in an escrow account, which is earmarked for paying the LVT and the construction people.

"Obviously, the UK government would be advised to stick that £814 million in an escrow account"

a) Don't you mean the Qatari government and b) the UK government would never do any such thing, they'd piss it up the wall on the latest bright idea (which they probably already have done with the £959M).

Mark, why on earth would you give them a refund? They paid £959 million for the land because it was worth it to them at the time. If they overpaid, tough. Start charging the LVT. They can then either develop the land and try to make a profit, sell it now to someone else (even at a loss) or they can just sit on it, and they still have pay the tax.

Look at it another way - if the land had been previously owned by anyone else but HM govt, LVT would still be a good idea and there would be no question about a refund. The fact that the govt used to own the land is irrelevant.

There's a rule that "Parliament cannot bind its successors" but that's a question of how much time has lapsed. It would be a bit hypocritical to sell them the land for full whack and then charge LVT. That is the sort of thing which a party to a contract has to disclose.

Conversely (1), if the Qataris has bought the land from the government thirty years ago, then all bets are off, what the previous government but five did does not bind today's government.

Conversely (2), had the Qattaris bought the land off a private vendor, that is quite different, because at no stage of those price negotiations did the vendor give any sort of undertaking that LVT would not be introduced, and the UK government played no part in the price negotiations and gave no such undertaking either .

And its bad enough that another arm of the government - Prince Charles - promptly fucked over the Qataris by withdrawing planning permission.

There's a rule that "Parliament cannot bind its successors" but that's a question of how much time has lapsed. It would be a bit hypocritical to sell them the land for full whack and then charge LVT. That is the sort of thing which a party to a contract has to disclose.

Conversely (1), if the Qataris has bought the land from the government thirty years ago, then all bets are off, what the previous government but five did does not bind today's government.

Conversely (2), had the Qattaris bought the land off a private vendor, that is quite different, because at no stage of those price negotiations did the vendor give any sort of undertaking that LVT would not be introduced, and the UK government played no part in the price negotiations and gave no such undertaking either .

And its bad enough that another arm of the government - Prince Charles - promptly fucked over the Qataris by withdrawing planning permission.

I certainly wouldn't charge it retrospectively, but if a LVT was introduced across the country as a change in tax policy, then I would consider the past govt ownership to be irrelevant, especially as we know the govt wasn't planning to introduce LVT at the time (or now, sadly). If they overpaid and the land is actually worth much less (even with the original planning permission), then the LVT will be correspondingly lower, and even lower still given that planning permission has been withdrawn.

There was a nice article in the Standard the other day basically shouting at Charles for having delayed the development until after the crash.

It might still be economic to build all the flats on the site that were originally planned.

The article also pointed out that London is short of development land and that it might be an idea to have a system that encourages people to use the permission they have for building. I can't possibly think of such a scheme...!

" no I mean the UK government, if and when the Qataris throw in the trowel and call it quits, that's when their ownership is cancelled and they get the balance paid back."

I'm confused. You didn't actually mention anything about the Qataris calling it quits. From the post "The Qataris will be able to use the £814 million refund*" "* Obviously, the UK government would be advised to stick that £814 million in an escrow account, which is earmarked for paying the LVT and the construction people." Why do you assume the Qataris would call it quits and not, as you suggest "use the £814 million refund to pay half the construction costs"? If, after they've done that they give up, then there won't be any of the £814M left to give back. And why would the UK government be paying itself LVT, or employing any construction workers? If the Qataris handed the land back again, I'd imagine the UK Gov't would say "thanks very much" and sell it to someone else.

BE, if you consider the £959 million to be a sunk cost, then of course it makes sense to build the flats.

B, nothing confusing at all.

I would hope that the Qataris don't call it quits, seeing as they have £814 million in prepaid construction costs/LVT. They've every incentive to get on with it. or sell the whole job lot, inclusive escrow account to somebody else.

I've not idea what sort of homes they were planning, but £814 million goes heck of a long way, you could build 800 super duper luxury apartments for that.

The govt is not paying itself the LVT, it just takes £29 million a year from the escrow account to cover it.